RF Ball Construction Company v. Jacobs

• Decision Date: 29 March 1956
• Docket Number: Civ. A. No. 1997.
• Citation: 140 F. Supp. 60
• Parties: R. F. BALL CONSTRUCTION COMPANY, Inc. v. Marcus M. JACOBS et al.
• Court: U.S. District Court — Western District of Texas

140 F. Supp. 60

R. F. BALL CONSTRUCTION COMPANY, Inc. v. Marcus M. JACOBS et al.

Civ. A. No. 1997.

United States District Court W. D. Texas, San Antonio Division.

March 29, 1956.

Josh H. Groce, Eskridge, Groce & Hebdon, San Antonio, Tex., of counsel, for United Pacific Ins. Co.

Brewer, Matthews, Nowlin & Macfarlane, San Antonio, for The Herweck Co., Inc.

Allen H. Kottwicz, Houston, Tex., for S. H. Kottwicz & Co.

Simon & Simon, by Richard U. Simon, Fort Worth, Tex., for Ball Const. Co.

H. Brian Holland, Asst. Atty. Gen., Andrew D. Sharpe, Edward W. Rothe, Sp. Assts. to the Atty. Gen., Russell B. Wine, U. S. Atty., San Antonio, Tex., Harman Parrott, Asst. U. S. Atty., San Antonio, Tex., for the United States.

RICE, Chief Judge.

Pursuant to Rule 52(a), 28 U.S.C.A., this Memorandum of Decision is filed and contains findings of fact and conclusions of law in this case, the facts of which have all been stipulated by the parties.

On June 26, 1951, R. F. Ball Construction Company (hereinafter called Ball) entered into a contract with the Housing Authority of the City of San Antonio (hereinafter called Housing Authority) for the construction of a housing project. Shortly thereafter Ball subcontracted the painting and decorating involved in such contract to Marcus M. Jacobs Company, a co-partnership consisting of Marcus Jacobs and Henry Leskey (hereinafter called Jacobs) for the sum of approximately $230,000 and required of it a faithful performance bond. On July 21, 1951, Jacobs applied to United Pacific Insurance Company (hereinafter called Bonding Company) for such performance bond, and one of the considerations agreed to in the application for such bond was an unconditional assignment by Jacobs to the Bonding Company of all percentages retained by Ball under the Jacobs sub-contract as collateral security for the protection of the Bonding Company, not only for losses growing out of the Housing job, but for the "payment of any other indebtedness or liability" of Jacobs to the Bonding Company, "whether heretofore or hereafter incurred". A few months thereafter the business of Jacobs was incorporated into Marcus M. Jacobs Company, Inc. (hereinafter called Jacobs, Inc.) and the corporation succeeded to all rights and liabilities of the partnership. No party to this controversy has raised any question about the succession, so this mutation from the partnership to the corporation is immaterial and will not be referred to further. See James Miles & Son Co. v. Aetna Casualty & Surety Co., D.C., 1 F.Supp. 925; Illinois Surety Co. v. John Davis Co., 244 U.S. 376, 37 S.Ct. 614, 61 L.Ed. 1206.

Thereafter, on April 4, 1952, Jacobs, Inc. obtained from the Bonding Company a similar bond on another sub-contract in Louisville, Kentucky, in the application for which Jacobs, Inc. agreed "to indemnify and keep indemnified the company against all loss, costs, damages, expenses and attorney's fees whatsoever * * *", and under such bond the Bonding Company exposed itself to a liability of some $35,000.

On April 30, 1953, the Housing Authority accepted the work of Ball and subsequently it was agreed between Ball and Jacobs, Inc. that the sum of $13,228.55 representing the retained percentages according to the terms of the sub-contract, was due and owing on this job by Ball to Jacobs, Inc., as of April 30, 1953.

In May, June and September of 1953, and long after the assignment as collateral security of the retained percentages on the Housing Authority job had been made to the Bonding Company, and long after the Bonding Company had executed its obligation under its bond on the Louisville job, the United States Government filed tax liens against Jacobs, Inc. totalling $17,010.85. No stipulation is made by the parties that this tax claim arose out of Jacobs, Inc.'s failure to pay taxes incurred on either the Housing Authority job or the Louisville job, so that this court must assume that they are ordinary tax liens, not growing out of the particular jobs in question, and the Government here makes no claim on either of the bonds.

After the tax liens had been filed, the potential liability on the Kentucky job incurred by the Bonding Company on April 4, 1952, became an actual liability and the Bonding Company was required to pay, by virtue of its bond in connection with the Kentucky project, the sum of $12,971.88.

Thereafter, because of numerous conflicting claims presented to Ball, Ball was unable to determine with safety to itself to whom the $13,228.55 of retained percentages which it held in its hands should be paid. Therefore, Ball filed this suit, which is an interpleader action, making as parties defendant Jacobs and Jacobs, Inc., the Government, the Bonding Company and certain suppliers of materials and services on the Housing Authority job, and asking for an interpleader's fee of $500, which has been stipulated to be a reasonable fee if under the law any interpleader's fee is payable. The Government filed its answer claiming the funds by virtue of its tax liens; the Bonding Company filed its answer claiming $12,971.88 of the funds by virtue of its assignment as collateral security and the loss which it sustained on the Kentucky job; the Herweck Company, Inc. filed its claim for $981.83 for materials furnished on the Housing job; S. H. Kottwicz & Company filed its claim for compensation and public liability insurance premiums on said job of $2,431.05. Several other claimants were made parties defendant but failed to answer and make claim, and default judgment was rendered against them. Kottwicz, although filing a claim, has not appeared in any of the hearings, and has failed to file any briefs herein in support of his claim; and it appearing to the court that under decisions such as United States v. Yates, Tex.Civ.App., 204 S.W.2d 399, as well as by virtue of default, Kottwicz is not entitled to recover, judgment will go against him.

The Herweck Company has filed its brief contending that it is entitled to priority, but has likewise stated that the Bonding Company had agreed to satisfy its claim if the Bonding Company prevailed herein, and has asked, therefore, that judgment go in favor of the Bonding Company, and in view of this Herweck likewise goes out of the case, under the court's rulings, since the court is of the opinion that the Bonding Company should prevail herein, and will respect the agreement between Herweck and the Bonding Company.

The principal question for determination by this court is as to which lien is prior — the Government's tax lien which arose by virtue of the filing of the notice of its tax liens in May, June and September of 1953, or the contract lien of the Bonding Company which arose long prior thereto by virtue of the assignment of the retained percentages in question by Jacobs to the Bonding Company, which by contract protected the Bonding Company from the loss which it incurred on the Louisville job, which became a potential loss upon the execution of the Louisville bond on April 4, 1952, prior to the filing of the Government's tax liens, but which was not paid under its bond until after the filing of the Government's tax liens.

The Government cites and contends that the cases of United States v. Security Trust & Savings Bank, 340 U.S. 47, 71 S.Ct. 111, 95 L.Ed. 53; United States v. Gilbert Associates, 345 U.S. 361, 73 S.Ct. 701, 97 L.Ed. 1071; United States v. City of New Britain, 347 U.S. 81, 74 S.Ct. 367, 98 L.Ed. 520; United States v. Acri, 348 U.S. 211, 75 S.Ct. 239, 99 L.Ed. 264; United States v. Liverpool, etc., Ins. Co., 348 U.S. 215, 75 S.Ct. 247, 99 L.Ed. 268; and United States v. Scovil, 348 U.S. 218, 75 S.Ct. 244, 99 L.Ed. 271, are in point and are controlling in this case, and says:

"* * * the principles of United States v. Security Trust & Sav. Bk.; United States v. City of New Britain; United States v. Scovil; United States v. Acri; and United States v. Liverpool & London Ins. Co., supra, must be applied."

The Bonding Company, on the other hand, contends that none of the liens in the above cited cases were contractual liens and that none of those cases dealt with mortgagees, pledgees, or purchasers within the meaning of Section 3672 of the Internal Revenue Code (now Section 6323, Title 26 U.S.C.), and further contends that in those cases the court was construing only the term "judgment creditor" and liens other than mortgages and pledges, and therefore says that such cases are not controlling in this case.

Section 3672 of the Internal Revenue Code provides in effect that filing of a federal tax lien does not affect the rights of any prior "mortgagee, pledgee, purchaser, or judgment creditor". Most of the decisions of the Supreme Court cited above and referred to by the Government dealt with inchoate judgment liens and none of those cases dealt with the contract lien of a "mortgagee", "pledgee" or "purchaser". The latter three categories are all based upon a contract right of some sort, whereas the term "judgment creditor" and the other liens dealt with in those cases, such as water rent liens, municipal tax liens and landlord's distress liens, arose by virtue of some statutory right, not specifically referred to in Section 3672.

The Bonding Company contends that since its assignment as collateral security was based upon a contract which was prior in time to the Government's tax liens, it is either a mortgagee, pledgee or...